Those of you who follow Kristine Katherine Rusch's blog may know that it was hacked on Thursday following one of her "The Business Rusch" posts. When she reposted her article on another site, that was hacked too. She's given permission through The Passive Voice blog for this article to be reposted far and wide.
Beginning of post:
Welcome to one of my other websites. This
one is for my mystery persona Paladin, from my Spade/Paladin short
stories. She has a website in the stories, and I thought it would be
cool to have the website online. It’s currently the least active of my
sites, so I figured it was perfect for what I needed today.
Someone
hacked my website. Ye Olde Website Guru and I are repairing the damage
but it will take some time. The hacker timed the hack to coincide with
the posting of my Business Rusch column. Since the hack happened 12
hours after I originally posted the column, I’m assuming that the hacker
doesn’t like what I wrote, and is trying to shut me down. Aaaaah. Poor
hacker. Can’t argue on logic, merits, or with words, so must use brute
force to make his/her/its point. Poor thing.
Since someone didn’t
want you to see this post, I figure I’d better get it up ASAP. Obviously
there’s something here someone objects to–which makes it a bit more
valuable than usual.
Here’s the post, which I am reloading from my
word file, so that I don’t embed any malicious code here. I’m even
leaving off the atrocious artwork (which we’re redesigning) just to make
sure nothing got corrupted from there.
The post directs you to a
few links from my website. Obviously, those are inactive at the moment.
Sorry about that. I hope you get something out of this post.
I’m
also shutting off comments here, just to prevent another short-term
hack. Also, I don’t want to transfer them over. If you have comments,
send them via e-mail and when the site comes back up, I’ll post them.
Mark them “comment” in the header of the e-mail. Thanks!
The Business Rusch: Royalty Statement Update 2012
Kristine Kathryn Rusch
Over
a year ago, I wrote a blog post about the fact that my e-book royalties
from a couple of my traditional publishers looked wrong. Significantly
wrong. After I posted that blog, dozens of writers contacted me with
similar information. More disturbingly, some of these writers had
evidence that their paper book royalties were also significantly wrong.
Writers
contacted their writers’ organizations. Agents got the news. Everyone
in the industry, it seemed, read those blogs, and many of the
writers/agents/organizations vowed to do something. And some of them
did.
I hoped to do an update within a few weeks after the initial post. I thought my update would come no later than summer of 2011.
I had no idea the update would take a year, and what I can tell you is—
Bupkis. Nada. Nothing. Zip. Zilch.
That
doesn’t mean that nothing happened. I personally spoke to the heads of
two different writers’ organizations who promised to look into this. I
spoke to half a dozen attorneys active in the publishing field who were,
as I mentioned in those posts, unsurprised. I spoke to a lot of agents,
via e-mail and in person, and I spoke to even more writers.
The
writers have kept me informed. It seems, from the information I’m still
getting, that nothing has changed. The publishers that last year used a
formula to calculate e-book royalties (rather than report actual sales)
still use the formula to calculate e-book royalties this year.
I
just got one such royalty statement in April from one of those companies
and my e-book sales from them for six months were a laughable ten per
novel. My worst selling e-books, with awful covers, have sold more than
that. Significantly more.
To this day, writers continue to notify
their writers’ organizations, and if those organizations are doing
anything, no one has bothered to tell me. Not that they have to. I’m
only a member of one writers’ organizations, and I know for fact that
one is doing nothing.
But the heads of the organizations I spoke
to haven’t kept me apprised. I see nothing in the industry news about
writers’ organizations approaching/auditing/dealing with the problems
with royalty statements. Sometimes these things take place behind the
scenes, and I understand that. So, if your organization is taking
action, please do let me know so that I can update the folks here.
The
attorneys I spoke to are handling cases, but most of those cases are
individual cases. An attorney represents a single writer with a
complaint about royalties. Several of those cases got settled out of
court. Others are still pending or are “in review.” I keep hearing
noises about class actions, but so far, I haven’t seen any of them, nor
has anyone notified me.
The agents disappointed me the most. Dean
personally called an agent friend of ours whose agency handles two of
the biggest stars in the writing firmament. That agent (having
previously read my blog) promised the agency was aware of the problem
and was “handling it.”
Two weeks later, I got an e-mail from a
writer with that agency asking me if I knew about the new e-book
addendum to all of her contracts that the agency had sent out. The
agency had sent the addendum with a “sign immediately” letter. I hadn’t
heard any of this. I asked to see the letter and the addendum.
This
writer was disturbed that the addendum was generic. It had arrived on
her desk—get this—without her name or the name of the book typed in. She
was supposed to fill out the contract number, the book’s title, her
name, and all that pertinent information.
I had her send me her
original contracts, which she did. The addendum destroyed her excellent
e-book rights in that contract, substituting better terms for the
publisher. Said publisher handled both of that agency’s bright writing
stars.
So I contacted other friends with that agency. They had all
received the addendum. Most had just signed the addendum without
comparing it to the original contract, trusting their agent who was
(after all) supposed to protect them.
Wrong-o. The agency, it
turned out, had made a deal with the publisher. The publisher would
correct the royalties for the big names if agency sent out the addendum
to every contract it had negotiated with that contract. The publisher
and the agency both knew that not all writers would sign the addendum,
but the publisher (and probably the agency) also knew that a good
percentage of the writers would sign without reading it.
In other
words, the publisher took the money it was originally paying to small
fish and paid it to the big fish—with the small fish’s permission.
Yes,
I’m furious about this, but not at the publisher. I’m mad at the
authors who signed, but mostly, I’m mad at the agency that made this
deal. This agency had a chance to make a good decision for all of its
clients. Instead, it opted to make a good deal for only its big names.
Do
I know for a fact that this is what happened? Yeah, I do. Can I prove
it? No. Which is why I won’t tell you the name of the agency, nor the
name of the bestsellers involved. (Who, I’m sure, have no idea what was
done in their names.)
On a business level what the agency did
makes sense. The agency pocketed millions in future commissions without
costing itself a dime on the other side, since most of the writers who
signed the addendum probably hadn’t earned out their advances, and
probably never would.
On an ethical level it pisses me off. You’ll
note that my language about agents has gotten harsher over the past
year, and this single incident had something to do with it. Other
incidents later added fuel to the fire, but they’re not relevant here.
I’ll deal with them in a future post.
Yes, there are good agents
in the world. Some work for unethical agencies. Some work for
themselves. I still work with an agent who is also a lawyer, and is
probably more ethical than I am.
But there are yahoos in the
agenting business who make the slimy used car salesmen from 1970s films
look like action heroes. But, as I said, that’s a future post.
I
have a lot of information from writers, most of which is in private
correspondence, none of which I can share, that leads me to believe that
this particular agency isn’t the only one that used my blog on royalty
statements to benefit their bestsellers and hurt their midlist writers.
But again, I can’t prove it.
So I’m sad to report that nothing has changed from last year on the royalty statement front.
Except…
The
reason I was so excited about the Department of Justice lawsuit against
the five publishers wasn’t because of the anti-trust issues (which do
exist on a variety of levels in publishing, in my opinion), but because
the DOJ accountants will dig, and dig, and dig into the records of these
traditional publishers, particularly one company named in the suit
that’s got truly egregious business practices.
Those practices
will change, if only because the DOJ’s forensic accountants will request
information that the current accounting systems in most publishing
houses do not track. The accounting system in all five of these houses
will get overhauled, and brought into the 21st century, and that will
benefit writers. It will be an accidental benefit, but it will occur.
The
audits alone will unearth a lot of problems. I know that some writers
were skeptical that the auditors would look for problems in the royalty
statements, but all that shows is a lack of understanding of how
forensic accounting works. In the weeks since the DOJ suit, I’ve
contacted several accountants, including two forensic accountants, and
they all agree that every pebble, every grain of sand, will be inspected
because the best way to hide funds in an accounting audit is to move
them to a part of the accounting system not being audited.
So when
an organization like the DOJ audits, they get a blanket warrant to look
at all of the accounting, not just the files in question. Yes, that’s a
massive task. Yes, it will take years. But the change is gonna come.
From the outside.
Those of you in Europe might be seeing some of that change as well, since similar lawsuits are going on in Europe.
I
do know that several writers from European countries, New Zealand, and
Australia have written to me about similar problems in their royalty
statements. The unifying factor in those statements is the companies
involved. Again, you’d recognize the names because they’ve been in the
news lately…dealing with lawsuits.
Ironically for me, those two
blog posts benefitted me greatly. I had been struggling to get my rights
back from one publisher (who is the biggest problem publisher), and the
week I posted the blog, I got contacted by my former editor there, who
told me that my rights would come back to me ASAP. Because, the former
editor told me (as a friend), things had changed since Thursday (the day
I post my blog), and I would get everything I needed.
In other words, let’s get the troublemaker out of the house now. Fine with me.
Later,
I discovered some problems with a former agency. I pointed out the
problems in a letter, and those problems got solved immediately. I have
several friends who’ve been dealing with similar things from that
agency, and they can’t even get a return e-mail. I know that the quick
response I got is because of this blog.
I also know that many
writers used the blog posts from last year to negotiate more
accountability from their publishers for future royalties. That’s a real
plus. Whether or not it happens is another matter because I noted
something else in this round of royalty statements.
Actually,
that’s not fair. My agent caught it first. I need to give credit where
credit is due, and since so many folks believe I bash agents, let me say
again that my current agent is quite good, quite sharp, and quite
ethical.
My agent noticed that the royalty statements from one of
my publishers were basket accounted on the statement itself. Which is
odd, considering there is no clause in any of the contracts I have with
that company that allows for basket accounting.
For those of you who are unfamiliar with basket accounting, this is what it means:
A
writer signs a contract with Publisher A for three books. The contract
is a three-book contract. One contract, three books. Got that?
Okay,
a contract with a basket-accounting clause allows the publisher to put
all three books in the same accounting “basket” as if the books are one
entity. So let’s say that book one does poorly, book two does better,
and book three blows out of the water.
If book three earns royalties, those royalties go toward paying off the advances on books one and two.
Like this:
Advance for book one: $10,000
Advance for book two: $10,000
Advance for book three: $10,000
Book one only earned back $5,000 toward its advance. Book two only earned $6,000 toward its advance.
Book three earned $12,000—paying off its advance, with a $2,000 profit.
In a standard contract without basket accounting, the writer would have received the $2,000 as a royalty payment.
But with basket accounting, the writer receives nothing. That accounting looks like this:
Advance on contract 1: $30,000
Earnings on contract 1: $23,000
Amount still owed before the advance earns out: $7,000
Instead of getting $2,000, the writer looks at the contract and realizes she still has $7,000 before earning out.
Without
basket accounting, she would have to earn $5,000 to earn out Book 1,
and $4,000 to earn out Book 2, but Book 3 would be paying her cold hard
cash.
Got the difference?
Now, let’s go back to my royalty
statement. It covered three books. All three books had three different
one-book contracts, signed years apart. You can’t have basket accounting
without a basket (or more than one book), but I checked to see if
sneaky lawyers had inserted a clause that I missed which allowed the
publisher to basket account any books with that publisher that the
publisher chose.
Nope.
I got a royalty statement with all of
my advances basket accounted because…well, because. The royalty
statement doesn’t follow the contract(s) at all.
Accounting error?
No. These books had be added separately. Accounting program error
(meaning once my name was added, did the program automatically basket
account)? Maybe.
But I’ve suspected for nearly three years now
that this company (not one of the big traditional publishers, but a
smaller [still large] company) has been having serious financial
problems. The company has played all kinds of games with my checks, with
payments, with fulfilling promises that cost money.
This is just another one of those problems.
My
agent caught it because he reads royalty statements. He mentioned it
when he forwarded the statements. I would have caught it as well because
I read royalty statements. Every single one. And I compare them to the
previous statement. And often, I compare them to the contract.
Is
this “error” a function of the modern publishing environment? No, not
like e-book royalties, which we’ll get back to in a moment. I’m sure
publishers have played this kind of trick since time immemorial. Royalty
statements are fascinating for what they don’t say rather than for what
they say.
For example, on this particular (messed up) royalty
statement, e-books are listed as one item, without any identification.
The e-books should be listed separately (according to ISBN) because
Amazon has its own edition, as does Apple, as does B&N. Just like
publishers must track the hardcover, trade paper, and mass market
editions under different ISBNs, they should track e-books the same way.
The
publisher that made the “error” with my books had no identifying
number, and only one line for e-books. Does that mean that this figure
included all e-books, from the Amazon edition to the B&N edition to
the Apple edition? Or is this publisher, which has trouble getting its
books on various sites (go figure), is only tracking Amazon? From the
numbers, it would seem so. Because the numbers are somewhat lower than
books in the same series that I have on Amazon, but nowhere near the
numbers of the books in the same series if you add in Apple and B&N.
I
can’t track this because the royalty statement has given me no way to
track it. I would have to run an audit on the company. I’m not sure I
want to do that because it would take my time, and I’m moving forward.
That’s
the dilemma for writers. Do we take on our publishers individually?
Because—for the most part—our agents aren’t doing it. The big agencies,
the ones who actually have the clout and the numbers to defend their
clients, are doing what they can for their big clients and leaving the
rest in the dust.
Writers’ organizations seem to be silent on
this. And honestly, it’s tough for an organization to take on a massive
audit. It’s tough financially and it’s tough politically. I know one
writer who headed a writer’s organization a few decades ago. She
spearheaded an audit of major publishers, and it cost her her writing
career. Not many heads of organizations have the stomach for that.
As
for intellectual property attorneys (or any attorney for that matter),
very few handle class actions. Most handle cases individually for
individual clients. I know of several writers who’ve gone to attorneys
and have gotten settlements from publishers. The problem here is that
these settlements only benefit one writer, who often must sign a
confidentiality agreement so he can’t even talk about what benefit he
got from that agreement.
One company that I know of has revamped
its royalty statements. They appear to be clearer. The original novel
that I have with that company isn’t selling real well as an e-book, and
that makes complete sense since the e-book costs damn near $20.
(Ridiculous.) The other books that I have with that company,
collaborations and tie-ins, seem to be accurately reported, although I
have no way to know. I do appreciate that this company has now separated
out every single e-book venue into its own category (B&N, Amazon,
Apple) via ISBN, and I can actually see the sales breakdown.
So
that’s a positive (I think). Some of the smaller companies have accurate
statements as well—or at least, statements that match or improve upon
the sales figures I’m seeing on indie projects.
This is all a long answer to a very simple question: What’s happened on the royalty statement front in the past year?
A lot less than I had hoped.
So
here’s what you traditionally published writers can do. Track your
royalty statements. Compare them to your contracts. Make sure the
companies are reporting what they should be reporting.
If you’re
combining indie and traditional, like I am, make sure the numbers are in
the same ballpark. Make sure your traditional Amazon numbers are around
the same numbers you get for your indie titles. If they aren’t, look at
one thing first: Price. I expect sales to be much lower on that
ridiculous $20 e-book. If your e-books through your traditional
publisher are $15 or more, then sales will be down. If the e-books from
your traditional publisher are priced around $10 or less, then they
should be somewhat close in sales to your indie titles. (Or, if
traditional publishers are doing the promotion they claim to do, the
sales should be better.)
What to do if they’re not close at all? I
have no idea. I still think there’s a benefit to contacting your
writers’ organizations. Maybe if the organization keeps getting reports
of badly done royalty statements, someone will take action.
If you
want to hire an attorney or an auditor, remember doing that will cost
both time and money. If you’re a bestseller, you might want to consider
it. If you’re a midlist writer, it’s probably not worth the time and
effort you’ll put in.
But do yourself a favor. Read those royalty
statements. If you think they’re bad, then don’t sign a new contract
with that publisher. Go somewhere else with your next book.
I wish
I could give you better advice. I wish the big agencies actually tried
to use their clout for good instead of their own personal profits. I
wish the writers’ organizations had done something.
As usual, it’s up to individual writers.
Don’t
let anyone screw you. You might not be able to fight the bad accounting
on past books, but make sure you don’t allow it to happen on future
books.
That means that you negotiate good contracts, you make sure
your royalty statements match those contracts, and you don’t sign with a
company that puts out royalty statements that don’t reflect your book
deal.
I’m quite happy that I walked away from the publisher I
mentioned above years ago. I did so because I didn’t like the treatment I
got from the financial and production side. The editor was—as editors
often are—great. Everything else at the company sucked.
The royalty statement was just confirmation of a good decision for me.
I hope you make good decisions going forward.
Remember: read your royalty statements.
Good luck.
I
need to thank everyone who commented, e-mailed, donated, and called
because of last week’s post. When I wrote it, all I meant to do was
discuss how we all go through tough times and how we, as writers, need
to recognize when we’ve hit a wall. It seems I hit a nerve. I forget
sometimes that most writers work in a complete vacuum, with no writer
friends, no one except family, who much as they care, don’t always
understand.
So if you haven’t read last week’s post, take a peek
[link]. More importantly, look at the comments for great advice and some
wonderful sharing. I appreciate them—and how much they expanded, added,
and improved what I had to say. Thanks for that, everyone.
The
donate button is below. As always, if you’ve received anything of value
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Thanks!
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“The Business Rusch: “Royalty Statement Update 2012,” copyright © 2012 by Kristine Kathryn Rusch.
